CFA’s Brian Minns will speak. Climate Risk and Return Conference From CFA Institute, held 20–twenty one New York City, April 2023.
Partnerships among institutional investors are essential to achieving a low-carbon economy.
As an institutional investor, we have a fiduciary responsibility to act in the best interests of our beneficiaries and to obtain sufficient investment returns to meet their expectations. To achieve this, we also need to ensure stable financial, social and environmental systems for building these returns.
At the University Pension Plan (UPP), we believe that promoting a sound system goes hand in hand with our fiduciary duty to our members. So when we developed our climate response and net-zero approach, we set our sights beyond our own portfolio. This is because we know that the real world also needs to reduce emissions and requires a well-managed low-carbon transition. We need systemic change from all corners of the global economy.
The net-zero transition will also enable institutional and other investors to build trust, resilience and competitiveness across the economy through profitable financing activities that support sustainable solutions and emissions reductions. We give you the opportunity to build.
By contributing to joint initiatives with the global investment community, investors build relationships through which they share expertise and best practices, leverage resources, and extend their influence to create needed change. I can. In this way, you can reduce uncertainty and risk and maximize your potential to generate revenue.
Such collaboration among asset owners is one of the most effective means for organizations like ours to foster systemic change and fulfill our shared fiduciary responsibilities.
Systemic risk requires collective action
When we engage directly and set expectations for both investor-owned companies and partnered external managers, we help these companies focus on transition paths, improving resilience and reducing emissions. increase. Investors also need companies to improve their climate-related disclosures to more accurately track progress towards net zero targets and make more informed investment decisions.
Finance-led groups such as Climate Action 100+ and the Institutional Investor Group on Climate Change (IIGCC) Strive to ensure sound science, integrity, and consistency in all member activities. By engaging a range of high-emitting companies through a set of shared goals, we will not only change their behavior, but also improve the structure of climate-related expectations and information flows for all companies and investors. working for
Collective advocacy to protect and enhance value
Through collective advocacy with policymakers and regulators, investors can encourage rules and frameworks that support the interests of beneficiaries and create conditions for well-managed climate change. Investors should United Nations Convened Net-Zero Asset Owners Alliance (NZAOA)a member organization of 85 institutional investors with over US$11 trillion in assets under management (AUM), and Ceres Investor Network on Climate Risk and Sustainabilitycollectively represents over 220 investors and over US$60 trillion in AUM.
through participation in policy working groups such as those convened by Canadian Coalition for Good Governance and the Responsible Investment Association, can define and promote good corporate governance practices in Canada and around the world. It can also influence public policy to improve governance standards. Improving transparency, accountability and disclosure helps manage risk and protect the value of investments.
Partnerships in Times of Change Make Collectives Stronger
As national and international climate transition regulation and incentive frameworks evolve, investors face new legal and reputational risks and potential impacts on earnings. Rather than navigating this evolving landscape alone, we can join investor alliances to help coordinate policy recommendations, foster better knowledge sharing, and mitigate new and old risks.
For example, to combat greenwashing and provide investors with more and better information to guide their decision-making, International Sustainability Standards Board (ISSB) will implement new global accounting standards for measuring and reporting climate-related impacts in January 2024. Our joint investor group is ready to contribute to the development of these new standards and support their launches around the world. Again, individual investors will be challenged to keep up with the rapid changes in the field and to develop the collective influence that investor groups can muster.
There are many options for participating with like-minded investors in local markets and on the international stage. The global low-carbon transition will continue to challenge all types of investors, presenting both risks and opportunities along the way. Net-zero will not be achieved in isolation, but collective action across the financial industry.
Through partnerships with institutional investors and investors of all sizes, we can shape the future of finance and bring about the systemic, global change needed to reach net zero.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, and the opinions expressed do not necessarily reflect those of CFA Institute or the author’s employer.
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Brian Mings, CFA
